Written by our Managing Director: Amit R. Stavinsky-12/07/2015
Written by our Managing Director: Amit R. Stavinsky-8/31/2015
For a while, investors wished for the Federal Reserve Board not to raise rates, however, at this point the Fed is stuck between a rock and a hard place. Why is that? Because if rates don’t rise as the market wishes, then the Federal Reserve Board will have to explain the reasons for not raising rates. Such reasons could include employment weakness, lackluster GDP and inflation growth at home, heightened volatility risk, emerging markets’ meltdown, commodities selling route, slowing Chinese economy, and currencies’ devaluation around the globe.
On the other hand, the reverse might happen if the Federal Reserve Board does end up raising rates by year’s end. This in turn, will have the Federal Reserve Board pointing out the positives in the U.S. economy and global markets. Such positives might include fundamental economic improvement toward full U.S. employment, inflation rates closing in on the Fed’s preferred 2% annual rate, and positive GDP growth rate at home.
Therefore, global financial markets need to be mindful of what they wish for… The right recipe just might be a one-off marginal interest rate increase before year-end to go along with positive sentiment on the U.S. economy by the Federal Reserve Board. In this scenario, investors should position themselves to take advantage of a likely increase in market volatility by anticipating improved economic conditions by year-end in the U.S. and foreign markets alike. For additional information, please contact us at 818-914-7460 or at firstname.lastname@example.org.
Written by our Managing Director: Amit R. Stavinsky-8/20/2015
Can you recall what happened on the week of October 6, 2008?
That week the Dow Jones industrial average fell 1871.33 points or 18% while the S&P 500 dropped 198.34 points or 18%.1 Panic was rampant on Wall Street and investors witnessed their retirement funds dwindle by the hour.
Now, go back in time and imagine you have your retirement savings invested with one of those online startups that uses computer algorithms to allocate investments, also known as Robo-Advisors. You hear the news that the stock market is falling off a cliff, and the first “knee jerk reaction” is call your Robo-Advisor to review your account. You, next, dial an 800 number and on the other end a robot tells you to please hold while it searches for a representative. Finally, a while later, an advisor you had never met or spoke to before attempts to attend to your financial worries. By the time the call ends, the Robo-Advisor may have turned into a... Read More...
Written by our Managing Director: Amit R. Stavinsky-6/12/2015
Not a lot. iEuropean stocks fell as Greece deferred on a debt repayment, German bonds extended declines in their worst week since 1998, and their 10 year bunds climbed to 0.87%. Treasuries dropped, and yields on the 10 year Treasuries increased three basis points to 2.34% iiwhile the nonfarm payrolls reported to rise by 280,000 jobs in May compared to the Bloomberg forecast of 226,000 increase. The unemployment rate moved higher to 5.5% from 5.4%, iiiand the labor participation rate ticked a tiny bit higher from 62.8% to 62.9% ivwhile the Organization of the Petroleum Exporting Countries (OPEC) expectedly left its output level unchanged at 30 million barrels per day.
In my view, this is a lot of data about nothing new as to the direction of interest rates in the near future. Financial markets, in essence are like little “babies” that like to throw tantrums when the future is unclear. This in turn, breeds volatility which brings opportunity. Professional speculators might point out, that from now to the end of the year pundits across the spectrum are likely to flip flop on the strength of the labor market and the U.S economy in general due to inconsistent financial data. In that case, any weakness in bond and stock markets alike might be exaggerated; and therefore, should be used as buying opportunities.
Written by our Managing Director: Amit R. Stavinsky-6/11/2015
Why Invest in a Volatile Market?
Uncertainty breeds volatility and volatility breeds uncertainty. This is the vicious cycle financial markets should expect from now to the end of 2015. Investors should be aware of heightened bond, stock, commodity, and currency market volatility, mostly as a result of interest rate uncertainty.
This year’s gains in global bonds evaporated. Gold and oil prices continue to drop. Greece’s persistent financial woes remain a drag on overseas markets.
So, with all of this uncertainty, what should investors do? In case some of us are contrarian in nature, volatility can also breed opportunity. For starters, depending on whether the Federal Reserve raises the Fed Funds rate in a slow, minute manner or executes a one-off, Fed Funds interest rate increase, investors should attempt to capitalize on any bond market weakness today. Investors should start by gradually, but aggressively, picking up either taxable or tax free Municipal bond offerings where the spread over Treasury yields is attractive.
In addition, the recent bond market volatility in Europe likely won’t deter their Central Bank’s Chief from continuing to purchase 65 billion Euros per month of government securities. This action might also put a floor on any European bond market route. Such a scenario can present buying opportunities for value investors.
In our view, a value discipline of daily analysis for the optimum risk-reward sweet spot, along the yield curve, should enable investors to take advantage of the current bond market volatility. In a like manner, investors should consider looking at high quality growth businesses available at attractive prices.
The investment world can be confusing and, yes, quite volatile. At Tamar Securities staying ahead of economic fluctuations, government actions, and financial market dislocations here and abroad is our discipline. Our portfolio managers search for the best risk reward opportunities especially during times of heightened uncertainty and market volatility. When we can help, please contact us at 818-914-7461 or at email@example.com. Read More...
With last week’s announcement by the Fed that it is ending QE (quantitative easing), some analysts are sounding like Chicken Little, worried about the effects of such a move on financial markets. In actuality, there are some reasons to be concerned; the market is not cheap with the S&P 500 trading at an average 17.6X earnings, world economies are facing near stall GDP growth rates and the U.S labor participation rates are at an all-time low of 62.8%.
However, it is important to point out that the QE termination really took place about eight months ago, when the Fed committed to reduce its monthly $85 billion purchases of Treasuries and Mortgage-backed securities by a mere $10 billion a month.
What the worrywarts haven’t recognized is that the Fed is sitting on some $4.5 trillion of these instruments previously purchased to keep mid to long-term interest rates low. At this point, the Fed intends to hold on to their portfolio and to continue investing its proceeds for as long as Fed Fund rates (short-term rates) remain at 25 basis points.
This means, at a current reinvestment rate of about 4%, the Federal Reserve Bank should continue purchasing about $180 billion in new Treasury and Mortgage Backed securities every year. Hence, this scenario begs the question;